You return from a vacation, happy, rested. You enter your house immediately recognizing that something is not right. As you continue into your home you begin to see the signs of an intruder. A space on the desk…there was a computer monitor in that space when you left…what else did they take from you? You make your way to the phone and you dial 911- for all you know they could still be there- and you leave the house until the police arrive.
They search the house, and inform you that it’s safe to return. They advise you to create a list of what has been stolen so that you can file a claim with your insurance company. However, they let you know, your belongings will likely never be recovered.
“How did this happen?”, you ask yourself out loud. The policeman then tells you what you should have done to prevent the violation on your home and your sense of safety. The entry point was a window with a lock that was not criminal proof. The lights were set to timers that went on and off at the same time every night. The ADT sign was just a sign, not a security system. You cancelled your paper, but there were still throw aways that were delivered. Your trash cans did not go out on trash day. All signs of an empty house, an easy target. And then he adds, “If people spent the energy to prevent their homes from looking empty up front, they could avoid losses and this sense of angst.”
Or, imagine this…
You’re walking down the stairs of your house, ready to start your day and you feel a “pang” in your chest. A big pang. And then this pain in your left arm. You know the signs of a heart attack, but could this really be happening? You aren’t even 60! You feel clammy, sweaty…maybe if you just sit down it’ll pass? But that “pang” hurts, so you make your way down the stairs to the phone and dial 911.
At the hospital they tell you you’ve suffered a minor heart attack, and your heart shows signs of damage. You’ll recover, but major lifestyle changes are required if you want to really live. You’ll have to lose that extra 40 pounds, cut out saturated fats, reduce your cholesterol, reduce your high blood pressure, etc. Basically, you haven’t been paying attention and, while you’ll recover, you’ll never be the same as you would have been had you paid attention in the first place.
And finally, imagine this…
You are a small business owner. You have only 4 or 5 employees, so it’s impossible to completely segregate their duties. In any event, they are all like family. You trust them implicitly. But times are not as good as they used to be, and money is tight. In an effort to lower expenses, you find yourself looking a little more closely at expenditures…and then you see it. A little bit here, a little bit there…”Betty” your loyal employee who you trust implicitly has been stealing in incremental amounts that individually were so small but in the aggregate add up to a significant amount.
You make your “911” call- to a Certified Fraud Examiner.
Just like the homeowner, you feel violated…but worse since you know the perpetrator and you trusted them. Just like the homeowner, you ask, “How did this happen?”. The CFE tells you exactly what the policeman told the homeowner. The cash is gone. It won’t be recovered. They will tell you exactly how it happened. But, if the energy had been spent upfront on prevention you could have avoided the losses completely.
Just like the heart attack victim, you can’t believe that it is happening.
But believe it.
The 21012 Report to the Nations on Occupational Fraud and Abuse will be released in July. Of note to the small business owner:
- Occupational fraud is a significant threat to small businesses. The smallest organizations suffered the largest median losses. These organizations typically employ fewer anti-fraud controls than their larger counterparts, which increases their vulnerability to fraud.
- The presence of anti-fraud controls is notably correlated with significant decreases in the cost and duration of occupational fraud schemes. Victim organizations that had implemented any of 16 common anti-fraud controls experienced considerably lower losses and time-to-detection than organizations lacking these controls.
- The longer a perpetrator has worked for an organization, the higher fraud losses tend to be.
- Survey participants estimated that the typical organization loses 5% of its revenues to fraud each year.
Are you running your business like an emergency room or a 911 call? Do you think it’s time to start paying attention to the strategies and choices that would eliminate those responses in the first place? The starting place is having a true understanding of what internal controls are operating and effective in your organization. You will not achieve your business objectives without a system in place that works.
Don’t dial 911…call me at 949-887-3820 and let’s talk about your internal controls!